By John Powers*
The most likely threat to long-term national security is not from the wars in Ukraine or Israel. It’s not from China’s provocative actions towards Taiwan, or its interference in freedom of navigation in the East and South China seas. Nor, is it from a mass drone, cyber, or ballistic missile attack.
No – the most likely threat to Australia’s national security, short of nuclear war, is from the US’s national debt.
Prophetically, Admiral Mike Mullen, the former Chairman of the US Joint Chiefs of Staff warned Congress in 2012 that the US’s national debt would be the nation’s greatest security threat. At that time, the US national debt was $21.6 trillion AUD. Today, its $51.9 trillion. That’s a $154,000 tax bill per US citizen.
Although many gauge the US economy by its stock market, where returns are record breaking, the US’s debt has no correlation to the stock or bond markets. Government “debt” is the cumulative effect of budget deficits. The US has run annual deficits, spending more than it collects in taxes, almost every year since it was founded in 1776.
The issue with US deficit spending arises when mandatory expenditures – debt interest payments, federal retirement schemes, and medicare – become the predominant expense rather than discretionary items like defence, critical infrastructure, and transportation networks. Since the end of World War II, the US national debt has hovered around 100 percent of GDP. Catastrophically, in the last decade, the federal debt to GDP ratio has spiralled to a colossal 136 percent – the highest in US history. It is projected to reach 148 percent by 2030 if the US fails to rectify its debt disorder.
Beyond the myriad of global economic consequences this causes, the debt’s impact to national security decisions, international agreements, and global military sales is devastating. For example, the Taiwanese representative to the US government said on 6 October 2024 that $29 billion AUD worth of military equipment was currently overdue to Taiwan because of US production and supply chain shortages, which are the result of funding issues influenced by US stop-gap and continuing budget resolutions. This leaves Taiwan’s defences in a precarious state and illustrates why the sheer volume of the debt, coupled with a lack of political will to raise revenue or cut spending, has increased national security risks both domestically and globally. Former Secretary of Defense, James Mattis, has opined that “no nation in history has maintained its military, diplomatic or economic power while failing to keep its fiscal house in order.”
Universally, economists fear that if the US debt continues to grow without political intervention it will result in global banking institutions and investors losing their confidence in Washington’s financial reliability, which would severely undermine not only the international markets, but global supply chains too. Most economists agree that if this happened, another global monetary crisis looms, which would have a vicious impact on Australia’s national security and economic stability.
Although the economic relationship between Australia and the US doesn’t get the same bravado as our defence and intelligence relationships, our two nations have a long-standing trade and investment connection, underpinned by the Australia-US Free Trade Agreement. Australia is the US’s ninth largest source of foreign investment, injecting $172 billion AUD into the US economy annually. Conversely, the US is Australia’s leading foreign investor, with goods and services amounting to $283 billion AUD.
As a nation we should be gravely concerned about the US’s debt crisis, especially in light of AUKUS, which tethers us even closer to the US economically. More than ever, especially as it pertains to our nation’s future deterrence capabilities, any delay, such as is happening to Taiwan, in the procurement of major defence acquisitions, or disruptions within AUKUS supply chains, could result in our national security posture being placed in even more peril.
That is why it’s vitally important that government create and invest in indigenous defence primes so we can be reliant on Australian businesses and manufacturers to produce the critical supplies we need to deter and protect our sovereignties. As we look at our ADF’s posture and budget, we recognize, despite two consecutive years of surplus, our country is still reeling from the global economic downturn caused by covid and the disruption the wars in Afghanistan, Ukraine and Israel have had on world markets and supply chains.
For too long we’ve not been disciplined in our budgetary choices and decisions. In the near term, especially in light of the US’s debt crisis, supply chains should be the critical consideration for nearly every decision we face as a nation. Government must carefully and deliberately balance the imperatives of a constrained budget environment with the requirements to sustain and enhance our national and economic security. We must identify areas where we can reduce spending and expand our sovereign supply chains, whilst minimizing risk.
Unfortunately, because it’s a presidential election year, neither Harris nor Trump, nor democrat or republican congressional candidates are talking about the draconian effects the national debt is having on Americans because the hard realities would shock the voters. Instead, the politicians are leaving it to after the election in 2025 when two events will compound the existing problem. First, on 1 January the national debt ceiling, which was suspended in 2023 returns; and second, all the tax cuts that were implemented in 2017 expire – creating a perfect economic storm for the new administration and congress to confront. When this occurred in 2023, before congressional emergency action, the US was on the precipice of financial default. The situation is much more dire today.
*John Powers is a naturalised Australian with an extensive career in US army special operations and national intelligence activities. He is a member of the RSL’s Defence and National Security Committee and a strategic advisor to Nihon Cyber Defence in Japan.
This article first appeared in The Canberra Times on 26 October 2024.
